A fund for conservative investors, it used the PE ratiobased asset allocation model. The net long equity allocation will be determined based on the month-end weighted-average PE ratio of the Nifty 50 Index and the portfolio is rebalanced within the first five business days of the following month. Once the Nifty PE crosses 22, the fund has a net long position of 20-30% in equities. If PE goes below 14, the fund has a net long position of 70-80%. The fund manager uses a bottom-up approach for stock picking, has a diversified portfolio and adopts a multi-cap strategy for the equity portfolio.

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Fund Manager: Anoop Bhaskar
Investment Style: Mid Growth
Investment Process: The fund manager is mindful of the sector weights in the benchmark index when constructing the portfolio. He scouts for growth-oriented companies available at reasonable valuations.

Silver Date of Analysis: July 2017

The leadership at IDFC Sterling Equity has witnessed multiple changes in the past. Kenneth Andrade helmed this fund from March 2008 till it was taken over by Aniruddha Naha in June 2013.

Naha relinquished his management responsibility when he quit the fund house in March 2016 and subsequently its reins were taken over by Anoop Bhaskar. Andrade was an accomplished manager and the fund had built an impeccable track record under him. He quit the IDFC fund house in September 2015. In our opinion, Bhaskar is an apt replacement for Andrade. Despite the leadership change, there is a continuity in the process.

Like his predecessors, Bhaskar too pays heed to the IISL Nifty Free Float Midcap 100 Index, loosely aligning the portfolio’s sector weights with those of the index. Having said that, he does not mind being significantly overweight or underweight in sectors either from a bottom-up basis or macro perspective. Yet, Bhaskar has a distinctive style of investing which he brings to the fore while executing the strategy.

Consequently, the portfolio went through a makeover after he took over the fund to ensure that it is in line with his investment approach. While investing, he looks for companies which have decent amount of promoter holdings, good cash generation, low leverage, and profitability over a cycle. He avoids businesses that show profitability in spurts. Given the fund’s small/mid-cap bias, it gives Bhaskar an opportunity to play to his strength.

However, the investment team has witnessed significant turnover in the last few years which is a cause for concern. Except for Bhaskar, the other team members currently lack long-term portfolio management track record, though they have good research experience. Hence there is a key-man risk in Bhaskar.

Nevertheless, IDFC Sterling Equity Fund is well placed under Bhaskar’s leadership and we draw conviction from his presence at the helm of the investment function. He is a proven small/mid-cap specialist and under him the fund has the means to outperform the competition over a longer time frame

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

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While unpredictability in the equity markets is accentuated in this segment, factors such as constrained liquidity, limited coverage, and poor disclosures make mid-cap investing a tricky proposition. Hence, the need for a skilled manager and a solid investment process cannot be overstated. ICICI Prudential Midcap makes the grade on both counts. Mrinal Singh is a competent portfolio manager who has been in the job since May 2011. He has had extensive experience as an analyst in the small/mid-cap space. Unsurprisingly, intensive research forms the core of his investment approach. He fluidly combines top-down and bottom-up approaches to identify companies to invest in. Although the investment strategy here is intended to be growth at a reasonable price, Singh, given his expertise in value investing, tends to scout for stocks that are attractively valued.

Therefore, to complement his value bent, Mittul Kalawadia, who typically adopts a growth-oriented investment approach while investing, was appointed as the comanager here on April 2016. As per the fund house, both the managers share equal responsibilities on this fund now. This has also led to some tweaks in the fund’s investment process, though the broader strategy remains unchanged. For instance, an element of benchmark alignment has been introduced by reducing the extent of the portfolio’s deviation from its benchmark. Also, while selecting stocks, growth aspect is now given more prominence than before. Although ancillary, these changes would give teeth to the strategy.

ICICI Prudential Midcap Fund performance has been below average in peer-relative terms over the past few years, that is, from 2015 till 2017 so far. This is largely because Singh has positioned the portfolio for an uptick in the economic cycle, which is yet to happen. While we will evaluate how the comanagement shapes up in the fund going ahead, we continue to draw conviction from Singh’s presence at the helm of the affairs here. We believe his research-driven investment approach and executional capabilities would keep the fund in good stead.

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For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

Invest Rs 1,50,000 and Save Tax up to Rs 46,350 under Section 80C. Get Great Returns by Investing in Top Performing Tax Saving ELSS Funds. Save Tax Get Rich

Equity Linked Savings schemes or ELSSs are often called the ‘first’ mutual fund scheme. This is because most mutual fund investors get into mutual funds via ELSSs or tax saving/planning mutual fund schemes. Investments in ELSSs qualify for tax deductions of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. Most investors start investing in ELSSs to save taxes, and and slowly they start investing in other equity mutual fund schemes.

If you are not investing in ELSSs to save taxes under Section 80C, you should reconsider your decision to stick to traditional tax-saving options like Public Provident Fund (PPF), National Savings Certificate (NSC), etc. The government-backed tax-saving options offer assured returns. However, the returns are likely to be modest. So, using these options to fund your long-term financial goals may not be a wise idea.

ELSSs come with the shortest mandatory lock-in period of three years among the tax-saving options available under Section 80C. Other popular options like PPF and NSC have a much longer lock-in period. Though PPF allows partial withdrawal after five years, it is a product with a tenure of 15 years. NSC has a lock-in period of six years.

Sure, ELSSs are riskier than government-sponsored schemes. This is because ELSSs invest in stocks and stocks are risky and volatile in the short-term. That is why it is important to invest in ELSSs with a longer horizon than the mandatory three-year lock-in period. Since ELSSs are equity schemes, investor should be prepared to stay invested for at least five to seven years.

However, ELSSs also reward investors for the extra risk. For example, ELSS category has offered tax-free returns of around 13.52 per cent in three years, 17.29 per cent in five years, and 9.83 per cent in the 10-year horizon. Other government-backed schemes offer single-digit returns.

Methodology: Save Tax Get Rich Mutual Funds has employed the following parameters for shortlisting the mutual fund schemes.

1. Mean rolling returns : rolled daily for the last three years.
2. Consistency in the last three years : The three-year period is divided into smaller time periods each with a progressing weighting.
3. Downside risk : We have considered only the negative returns given by the mutual fund scheme for this.
X = Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z

4. Outperformance : It is measured by Jensen’s Alpha for the last three years. Jensen’s Alpha shows the risk-adjusted return generated by a mutual fund scheme relative to the expected market return predicted by the Capital Asset Pricing Model (CAPM). Higher Alpha indicates that the portfolio performance has outstripped the returns predicted by the market.

Reliance Small Cap Fund scheme seeks to generate long term capital appreciation by investing predominantly in equity and equity related instruments of small cap companies.

This Reliance Small Cap Fund has beaten its benchmark in all six years since its inception and has held onto a three or four star rating without a pause. It is quite true to label, consistently featuring a 65 to 70 per cent allocation to small-cap stocks, with most of the residual holdings in mid-caps. The large-cap allocations are usually at 5 per cent or less.

That it has managed solid performance, even in bear phases, without leaning on large-caps is creditable. The fund adheres to a simple philosophy of finding good businesses at a good price. While a bottom-up stock picker, it does not lean overtly towards the value or growth styles of investing.

Reliance Small Cap Fund is one of the rare funds in the equity space which have beaten its benchmark as well as category over all time frames: one year, three years, five years or even seven years. Over three and five years, the fund has been ahead of its benchmark by 6 to 13 percentage points. Compared to the category, it has managed 3 to 5 percentage point outperformance. In the last one year, it has even widened its outperformance of the category to 7 percentage points.

The only shortcoming of this fund is that it hasn’t seen really challenging bear markets like the one in 2008 as it made its debut much later. But in 2011, it has capped its losses at levels far lower than those of the index and the category. Like its peers, burgeoning size is the only challenge, with assets at over Rs 6,542 crore as on January 2018.

Reliance Small Cap Fund is a reliable performer with a laser focus on small-caps.

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In our opinion, manager Chirag Staved ranks amongst the best portfolio managers in the small/mid-cap space. He has been managing this fund since its inception in June 2007. There is a perceptible quality bias in the investment style, characterized by investments in companies with strong management teams and robust business models. The manager is a patient investor with a long-term investment horizon, which jells well with the quality bias. Given the bias for quality stocks, we expect the fund to underperform the competition in market phases where momentum is in play, but does extremely well over the long term

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

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This fund was earlier known as Birla Sun Life MIP II – Savings 5 Plan (BMIP5). The scheme comes with a good track record but recently the fund house changed the names of the funds. The change suggests that the contours of the fund have also changed

Going by the new name of the scheme, it’s highly unlikely that Birla Sun Life Credit Opportunities Fund (BCOF) will invest in equities. Sell and switch your proceeds to any of the MIP funds

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

At a recent investor meeting, as the mutual fund representative was displaying the fantastic returns his funds had generated, an investor got up and said that his returns are lower than the returns on the presentation slide. The rep tried to assuage him by talking about the timing of investment, how returns will align over a longer period of time; but obviously could not convince him. To corroborate the investor’s point, a recent study shows that investors’ folio returns were almost 5-6% lower than fund returns over a full market cycle—or a period of about 10 years. Why is that so? Apart from factors like loads (not there any more), the most important reason is timing of entry and exit. Investor behaviour is aligned towards starting equity investments when markets are touching new highs and exits when markets are touching lows. Even for individual portfolios, equity allocations rise when markets are high and decrease when they are low.

To avoid this behaviour, a bright solution was SIP (systematic investment plan), where you invest a fixed amount periodically. The idea behind an SIP is regular investment and avoiding market timing. This smoothens volatility over longer periods of time. Technically, what the SIP does is help you lower your average cost in a falling market. But in a rising market you are buying lesser quantity for the same investment and thus the average cost goes up. Hence, the SIP performance measurement takes into account that investment is made at many points in time. On the other hand, fund returns are measured assuming you invested at one particular point in time and exit in another. This is why there is going to be a disconnect when SIP returns are measured against fund returns. Particularly in a growth market, which is on a long-term rising trend, single-point return is likely to be elevated because an SIP continues to invest as the market rises.

SIPs are hugely successful tools for enforcing savings discipline and should probably be called ‘systematic savings plan’. For first-time investors and those with low exposure to mutual funds or stocks, they are a simple and convenient tool. However, to extract maximum returns out of SIPs, it is critical not to exit in falling markets and if possible even enhance the amounts. If history is anything to go by, a large number of current SIP investors are likely to stop or reduce their SIPs when markets fall, which is counter-productive. This investment behaviour ensures that their cost will remain high and returns will be significantly lower than fund returns.

Let’s assume that Indian equity markets will give 13-15% returns over a long period of time—in line with historic returns too. However, if in the recent past (say 1-3 years), returns have been much higher than normal returns, it implies that markets are discounting future returns now itself. So, unless you believe that the long-term return trajectory has shifted (a very tough call to make), future equity returns for next 1-2 years are likely to be lower than in the recent past, and likely to be lower than long-term returns.

It is not unusual for equity markets to deliver returns before the earnings growth comes. If there has been a period of linear rise in stock prices, it may be followed by a period of correction. This is somewhat the situation at present. Corporate earnings growth are yet to show a meaningful uptrend but stock market has done well in the past 2 years. In such a scenario, should you be raising your exposure to an asset class where future returns are likely to be lower than in the past?

We are clearly at a point in the cycle where greed is the dominant sentiment. It is evident in the violent movement in small-cap stocks, aggressive pricing and huge oversubscription of IPOs. Even though corporate earnings have been slow to pick up, stock prices have risen on the hopes of high growth in the future. Even if the expected growth occurs, most of it is likely already reflected in stock prices. So, we’ve already borrowed returns from the future. Markets are never rational and move from extreme pessimism to high optimism, implying that future returns are likely to be lower. In an earlier column we had talked about risk-reward being skewed at different points of time. The current time seems to be one of low return and high risk.

Longer term, equity remains the best asset class to be in, provided you remain invested when and during the market falls. The current period offers a tactical opportunity to possibly realign your asset allocation and book profits if your equity allocation has exceeded the original level. In case your equity weight is already low or you are a first-time investor, then any time is a good time to get started or remain invested. This column has been a strong votary of right asset allocation based on your investment horizon and risk profile. The right asset allocation and the discipline to stick to it during tough market conditions will align your returns with the fund or the benchmark.

In a popular kids’ parable of the ant and the grasshopper, the ant keeps toiling in the summer to save food for the winter. While, the grasshopper enjoys the bountiful summer but dies in the winter as he had not saved any food. Most of us lie somewhere in the middle. We toil and save but also are also keen to enjoy the fruits. If you have been investing for some time, maybe it’s time to be a grasshopper, for once.

SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

Reliance Tax Saver Fund – An aggressive performer in the ELSS category, this fund has alternated between chart-busting returns and a moderate show. After a huge outperformance of the category, which lifted its ranking to five stars in 2014-15, it has dipped to three stars lately. But it has retained a three-star or higher ranking for much of its existence.

Reliance Tax Saver (ELSS) Fund has seen substantial swings in its market-cap allocations over the years. Large-cap weights were below 40 per cent until 2015, but have been steadily pegged up to 60 per cent in the last one year. Mid-caps, which were taking up a 40 per cent plus weight in the portfolio a year ago, are now down to 25 to 30 per cent, with small caps occupying about 15 per cent of it. The fund sets aside 20 to 30 per cent of the portfolio for multinational companies with robust fundamentals. It follows a blend of growth and value investing.

Reliance Tax Saver (ELSS) Fund three and five-year returns are ahead of the benchmark returns by 5 to 9 percentage points. As compared to the category, the fund has slightly underperformed over three years but is ahead of it by 4 percentage points over five years.

In 2015, after a bumper performance in 2014, the fund managed a timely shift to domestic recovery plays. This timely move has helped it stay ahead of the race in recent times, when economically sensitive and cyclical stocks have been back in vogue. Overall, the fund has fared better in tear-away bull markets than in bearish markets. This is an aggressive fund in the ELSS space.

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